Monthly Archives: June 2012

Monti Rules Out More Austerity Measures for Italy

Posted on by

If this holds, as previously discussed, some growth can return, albeit from currently depressed levels, as the austerity pushed down GDP and pushed up the deficit to the point where the deficit becomes sufficiently large to support things.

Monti Rules Out More Austerity Measures for Italy

June 13 (Bloomberg) — Italian Prime Minister Mario Monti’s government is not planning to adopt further austerity measures going forward, Pierferdinando Casini, the leader of the Union of Centrists party, told reporters in Rome today.

Casini, together with Pier Luigi Bersani and Angelino Alfano, the leaders of the Democratic Party and of the People of Liberty party respectively, met with Monti last night to discuss the European economic crisis. The three leaders pledged to back the government’s reforms that are now in parliament, according to a statement from Monti’s office.

“Nor the parties, nor the government are willing to plan a further budget adjustment although the situation has become very negative” also in light of the earthquake, which “will be a blow for public finances,” Casini said.

Share

Britcar British Endurance Championship, Brands Hatch Indy – Race Report

Posted on by

Britcar British Endurance Championship, Brands Hatch Indy – Race Report

By Steve Wood

Mosler Magnificent

Paul White complemented Javier Morcillo’s dominant opening stint to take a convincing win in the Azteca/Strata 21 Mosler in the two-hour race on Saturday afternoon. Andy Schulz pulled every trick he knew to get the Ferrari 430 started by Paul Bailey into contention with the Mosler and finished 38 seconds down, two laps ahead of the Lee Mowle/George Murrells Ginetta G55.

Qualifying

No surprises here – It was the championship’s “big four” at the front, with Javier Morcillo posting 45.816 around half-way through the 45 laps that the Mosler managed during the 50–minute session, which indicated that there wasn’t much sitting around for the Spaniard and co-driver Paul White. Andy Schulz and Paul Bailey did 48 laps, but ended nearly half a second shy of pole in the SB-Race Engineering-run Ferrari 430, a little more than a tenth ahead the Optimum pairing of Mowle and Murrells, who did the same amount of lappery in the G55. Having to be content with fourth place after half of the distance, though, were Mike Millard and Ian Heward, the Flat Six Rapier SR2 being sidelined with alternator failure, though the team were hoping that a complete rebuild of the Nissan engine, which revealed an incorrectly machined cylinder head, might enhance their reliability.

The Team Tiger Mantis headed the Class 2 runners, Chris Beighton reporting that all was now well with the 13-year old machine that hadn’t been raced for several seasons, with the Motionsport Ferrari 458 of Simon Philips and Peter Storey three-quarters of a second adrift. But splitting them on the grid were the two fastest of the Class 3 contingent, the Bullrun Lotus Evora and the returning Orbital Sound Lotus Elise of Chris Headlam and Jamie Stanley, which had missed the opening three rounds. “We’ve changed just about everything on the car and you’ll see the improvement when we go out for qualifying” revealed Jamie Stanley earlier in the day, a point that wasn’t missed by Bullrun’s Richard Adams; “Class 3 is getting very strong and competitive now” he rued after qualifying, adding “The Webb’s BMW and then the Chevron and now we’ve got the Abra/Poole BMW, plus the Elise is in too – it’s going to be tougher now”.

Share

Greek bank recapitalization, potential framework for Spain

Posted on by

From Dave Vealey:

On April 17 the EFSF made a 25 bb loan to the Hellenic Financial Stability Fund (HFSF) guaranteed by the Greek government. The HFSF used these funds from the EFSF to buy 25 bb EUR of 6-10 yr EFSF FRN MTN bonds.

On May 28th, 18 bb of the 25 bb EFSF bonds were sold to the Greek banks by the HFSF in return for convertible bonds or new shares in the bank.

The EFSF bonds are eligible collateral at the ECB and are thought to have been used to replace previous ELA borrowings by the same Greek banks.

This operation gives the Greek banks capital plus improved funding with the Greek government ultimately liable for the initial loan from the EFSF. However, no EFSF bonds were needed to be issued to the market. Effectively the ECB financed the Greek banking systems recapitalization.

The total amount set aside by the EFSF for Greek bank recapitalizations is 48 bb euro.

A similar structure could likely be done in Spain:

ESM makes a loan to the FROB (loan gtd by Spanish govt) to buy ESM bonds
The FROB buys ESM bonds
The FROB then sells the ESM bonds to banks in return for convertible bonds or common stock ownership in the bank
The Spanish bank then has a capital injection and the ability to post ESM bonds at ECB for funding

This avoids in theory at least, the ECB directly bailing out the Spanish banking system

Share

Fed Boosts Capital Rules for Banks, Hitting Stocks

Posted on by

The regulators are already requiring more like 8-10% capital from most banks, so raising the legal limit to 6% from 4% is inconsequential.

Fed Boosts Capital Rules for Banks, Hitting Stocks

June 7 (CNBC) — The Federal Reserve approved new rules Thursday for U.S. banks to set aside more money to cushion against unexpected losses, a key step in preventing another financial crisis.

The new rules require the nation’s largest banks to hold at least 6 percent of their assets in capital reserves, up from a minimum of 4 percent currently, by 2019.

The 2010 Dodd-Frank financial overhaul law—as well as an international agreement last year in Basel, Switzerland—require regulators raise capital requirements for banks.

The banks had lobbied vigorously against the proposals, saying setting aside so much money in reserve could limit what they could lend.

The rules are open to comment until September. They will be finalized after that.

Though the move was expected, financial stocks— including Bank of America and Morgan Stanley— fellsharply after the Fed approval was announced.

Share

LOCKHART SAYS MORE EASING NOT CALLED FOR AT THE MOMENT

Posted on by

I guess he’s ok with the output gap/unemployment…
And not that it matters, as they they only shoot blanks in any case.

*LOCKHART: COMMUNICATIONS, BALANCE SHEET ARE TOOLS
*LOCKHART: `WE HAVE NOT EXHAUSTED ALL OUR OPTIONS’
*LOCKHART: DEFLATION, DETERIORATING CONDITIONS COULD BE TRIGGER
*LOCKHART SAYS `STRESSED’ ECONOMY MIGHT REQUIRE EASING
*LOCKHART SAYS MORE EASING NOT CALLED FOR AT THE MOMENT

Share

Dudley on interest income channel

Posted on by

From a friend:

At the conference on Friday, NY Fed President Dudley presented a chart that showed the long-term impact on the budget deficit of lower Fed remittances of interest income over time (his point was that it would lead to a larger deficit and the Treasury should not assume recent levels of Fed remittances).

I asked him in Q&A if he considered that in the short-term, the interest being accrued by the govt sector would typically be accrued by the non-govt sector and it could thus be viewed as a form of fiscal drag, and that maybe it should be offset by looser fiscal policy elsewhere if the economy warranted it due to a large output gap.

His response, not surprisingly, was:
‘You are factually correct, but’:

  • A lot of that interest income goes to non-u.s. investors, so its not like the U.S. economy loses all that interest income.
  • The propensity to consume of savers is lower than that of borrowers.
  • The drain on interest income is more than offset by easier financial conditions elsewhere (via equities, credit spreads, etc).

That’s just how their models work/they see the world.

Share

Key Opposition Parties OK Talks On Consumption Tax Hike Bills

Posted on by

Not be out done in the global race to be the next Japan:

Key Opposition Parties OK Talks On Consumption Tax Hike Bills

June 7 (Kyodo) — Japan’s two key opposition parties decided Thursday to hold talks with the ruling Democratic Party of Japan on revising legislation to carry out social security and tax reforms, lawmakers said, offering a glimmer of hope for the government as it seeks to push through the reforms, which include a sales tax hike.

The main opposition Liberal Democratic Party formally signaled it would join the tax revision talks as requested by the DPJ, the lawmakers said.

In a shift of position, the LDP’s ally, the New Komeito party, also agreed to join the talks and make clear its stance on the reforms.

The three largest political parties will make arrangements on when to start the talks.

While the latest move marks a step forward in Prime Minister Yoshihiko Noda’s goal to have the legislation passed during the current parliamentary session, it remains uncertain whether the parties can narrow their differences over the reforms.

Noda also faces a difficult task over the tax issue, as LDP chief Sadakazu Tanigaki, though a tax hike proponent, is expected to press Noda to dissolve the lower house at an early date in return for cooperation in passing the legislation.

Share

U.K. Services Unexpectedly Sustains Pace of Expansion in May

Posted on by

Some hints the deficit may be large enough to sustain some growth.

No doubt this will be spun as ‘see, austerity works’, when the same deficit could have been achieved proactively with a tax cut and/or spending increase before the austerity increased the deficit the ugly way, via depressing GDP and elevating unemployment.

Headlines:

U.K. House Prices Rise as Halifax Sees Stagnation in Second Half
U.K. Retail Sales Increased in May on Warm Weather, BRC Says
U.K. Services Unexpectedly Sustains Pace of Expansion in May

Share